Market Place; Apple may defy the doomsayers, even in the long run.

By John Markoff

Published: October 19, 1994

SAN FRANCISCO—
IS Apple Computer for sale?

Despite a gangbuster quarter that suggests the company's Power Macintosh family of personal computers is taking off, conventional wisdom suggests that Apple, based in Cupertino, Calif., will soon wilt before the inevitable onslaught of a yet-to-be-shipped and untested Microsoft operating system, Windows 95.

The argument goes like this: Apple has lost its vision and ability to innovate, and Microsoft has borrowed all its best ideas. So, unless Apple receives a large equity infusion from a rich uncle like I.B.M or Motorola, its partners in the Power PC microprocessor chip alliance, it is certain to fall by the wayside.

This outlook, as it has been expressed in press reports, holds that Apple and I.B.M. will soon announce a renewed commitment to a single, shared PC design. Together the two companies might have the momentum to offset the Microsoft and Intel "Wintel" juggernaut. A shared I.B.M.-Apple computer platform would attract the software developers who are essential to attracting customers. I.B.M., or possibly Motorola, would then buy 10 or 20 percent of Apple.

It is an outlook that appeals to a number of computer industry analysts. "Apple has not wanted to do this for emotional reasons, but there are competitive issues," said Lucianne Painter, an analyst at Salomon Brothers in New York. "This will give Apple some financial incentive."

Richard Shaffer, publisher of the Technologic Computerletter, added: "This would give I.B.M. a way to boost Apple's profits for the long-term future. It's a strategic investment."

But is Apple really about to lose its independence? Maybe not.

The "Apple is finished" theory relies on what might be called the "sky is falling" hypothesis. Indeed, it seems to be more often the case these days that in reading analyses of the computer industry it is necessary to replace the name I.B.M. with Microsoft. There was a period during the mid-1980's when suggesting that I.B.M. might be making some strategic error invoked the standard response, "You can't fight City Hall." In the eyes of Wall Street, I.B.M. could do no wrong. Now the same is true for Microsoft.

But not so fast. Microsoft, based in Redmond, Wash., is not planning to ship its Windows 95 operating system before the middle of next year. Already delayed more than six months, the transition from the current Windows 3.1 to Windows 95 programs appears to be more traumatic and problem-riddled than Microsoft will admit.

A number of hurdles remain. Indeed, to use the new operating system in a comfortable way, it will be necessary to upgrade all of a user's applications, except games. Despite repeated assertions that Microsoft will finally close the gap with Apple next year, those who have looked closely at the Windows 95 user interface say Microsoft has not rid its desktop of visual clutter or matched Apple's ease of use.

If Apple is able to ship on schedule its next operating system version, System 8, which has an even flashier user interface, the quirky loner will retain a significant technical lead over its Microsoft-Intel competitors.

And what of the fears that software publishers are deserting Apple in droves? This quarter, small and innovative Macintosh developers are reporting strong sales based on Apple's Power Macintosh-led resurgence.

In the meantime, what is happening in the Windows world? The first hints of panic are emerging, as thousands of developers become lost in the crowd. In September, for example, more than 1,800 CD-ROM titles were released for the Christmas season. The sad fact is that no more than a handful will be profitable.

No, the predictions of Apple's imminent demise -- which have been issued repeatedly every time the company has hit a bump in the road -- are once again premature. Maybe it will not throw in the towel, after all.